Here is the weekly and pay attention to the last closed candle. It has a range of around 235 points and it closed with around 95 points from its low. Supply has come in because we are at high time frames where the significance in the amount of supply shows up with greater effect. Note, we are taking one candle in isolation and little else on offer on this time frame, it will take another week before we know on this time frame if the bulls are either weak or interested.
Any clued in trader will know that in order to get the best and cheapest price for your order, you will want to see most of the opposing traders no longer interested in going against you. Banks do this all the time and have the patience to wait, and if needs be, will trade in the other direction in order to get price back to where they can filter orders into the market. This wont be logical to many folks and takes considerable mental effort to get into the logic of pro money.
Daily chart
A much zoomed in daily chart to show you where we closed out the day and week. The 2nd last candle shows it hitting supply and the large spike on top will have trapped a lot of day trader longs. Such stupidity no longer surprises me because it has been like this for over 100 years and greed never ends, until the account ends.
The last candle is where we are now and clearly there is an engulf of the previous days emotional price action. Towards the close there was some buyers came in, but major looking on this time frame. Lets drop down another and see how it looks there.
4hr
This is as far in on the action as I like to get for a reasonable view on where to look next. I have 3 lines showing an area where price will have little difficulty in blowing through, very little in the way of demand is waiting and the next nearest spot is in the candle where I drew a horizontal line through. I expect something to happen there and a higher quality and more buy orders I expect to see at the top of the box on the left lower down. It is still clean and untouched for a long time and price has not been anywhere near it.
There is however one area I have not mentioned. The thick dark blue line is a major S/R area on the high time frames and it is acting as support at the moment. This is where you could see major supply broken and good reason why trading off that line is a bad move. I want to see conviction in the chosen direction and where some testing has happened even if on low time frames to allow one or two nice entries within the London session.
Thanks Doc. I have read your analysis multiple times but I have trouble understanding. So from your analysis, are we looking for potential buy or potential sell opportunity?
ReplyDeleteDoc, thaks you for your time and wisdom.
ReplyDeleteThe over all market is into long term supply as I have mentioned. It then makes sense to see will this supply hold and we can short, or if supply is consumed by the bulls and we seek long opportunities and this will only happen on the longer time frames in weeks time.
ReplyDeleteGiven most folks here are day traders, you drop down to lower time frames and look for other entries that can be contra to the longer time frames. So to answer your question, we look for whats happening today and keep in mind the over all supply that is still present and not yet consumed. Again I mentioned about a large candle on the 4hr that will be tested, and it has, and it failed, therefore the buyers in that candle are gone along with their orders. Today we have seen a large tail on the 10th of Feb tested and this has sent price into a small range and only just now, a small spike upwards which may be nothing more than a false move and grab cheap short order entry prices. Time will show this to be true or false.
It is the start of a trading week and plenty games are played at the open to shake folks out and also get them trading in the wrong direction. Only when you see clarity is a trade worth taking.
I had a brief short on the Euro at the Asia open and now waiting for it to rally into near term supply before I short it again. You have to see what has been done and by whom and if the areas being tested have had enough interest by pro money in the past, to be of interest again with enough orders left laying on the table for the taking.
It may sound simplistic, all we do is follow the money and the signs of it litter the charts on all time frames and on almost every day. There must also be enough room for profit, or else price will meander around and become nothing but a chopper for dumb money getting taken.
A while back I mentioned that it is a good exercise to mark areas on the charts where you think price will react and note the direction. When price eventually hits that area, has it reacted as you thought and was the direction correct. There is no need to trade at all, keep watching and waiting and use some inverted logic in this. What you see on the charts is the opposite of what we need.
Most people see the big moves of price on a chart, the very origin of those moves is what you need to pay a lot of attention to. It is where pro money paid the most they were willing for their orders before too much of one side came in and price moved away.
In brief terms, I am looking to short into Euro rallies today once untouched clean supply is hit from any rally.
Doc, you mentioned games are played at Monday open. I've noticed that Mondays are an especially dangerous time to trade because we get a lot of fakeouts to fill orders for the week. Mostly I've observed this going on Monday morning and Monday night. Do you feel that Monday during London/NY hours the market is thick enough to minimize these sorts of shenanigans and SD/PA/SR can be trusted as much as you'd trust it any other day, or should all of Monday be treated with skepticism? Cheers boss! :)
ReplyDeleteGames can be played at any time, but market open and close are good to times to watch. Orders are filled within a price range and not a single price point. Once price falls inside the desired range, orders will flow into the market and it is pro money's job to ensure they get as much filled as possible without causing price to move outside of the range. It is an impossible task the first time around.
ReplyDeleteThere are pro money operators with each session, each day and each week typically and a lesser amount per month and quarter. Other effects are futures contracts that end and the spot market which is what we trade will some impact from that too.
I look for orders being filled and if they are going in the direction I am interested in. Otherwise I have no reason to be in the market.
At the risk of stating the obvious and also stating a much abused statement. Trading is simple, traders make it complicated.
Hello Doctor,
ReplyDeletevery much looking fwd to your new content.
Cheers and Thanks.
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